There may be legal professionals who expect that the 2010 Amendments to UCC Article 9 (the Amendments) will finally do away with all those pesky non-uniform filing requirements that states have enacted over the years. Unfortunately, that won't happen. While the Amendments do provide many welcome revisions, very few states have used the enactment process to replace non-uniform filing provisions with the official text from Part 5 of Article 9.
The remaining non-uniform filing requirements pose risks for UCC filers because they are not always obvious. This article identifies by state a sampling of non-uniform departures from the official text of Article 9 that will not be affected by enactment of the Amendments. This article also offers some suggestions to avoid the potentially costly traps non-uniform versions of Article 9 create for those who file UCC records.
Florida
A non-uniform addition to Fla. Stat. § 679.512(1)(a) requires that all amendments provide the names of the debtor and secured party of record. The filing office refuses to accept an amendment that omits the party names under Section 679.516(2)(c) on the grounds that the record fails to correctly identify the initial financing statement in compliance with Section 679.512(1)(a).
Ordinarily, a rejected amendment poses little risk for the secured party. The filer will simply resubmit a corrected version after receiving the rejection notice. Unless, of course, the filing office rejects a time-sensitive record, such as a continuation statement submitted at the end of the six-month window. In that case, the secured party could be at risk. Consequently, a UCC filer should always include the party names when filing an amendment in Florida. The party names can be provided either on the amendment form, space permitting, or on an attached exhibit.
Georgia
The official text of UCC § 9-515(a) provides the general rule that a financing statement is initially effective for five years. There are some exceptions, however. If the record indicates that it is filed in connection with a public-finance or manufactured-home transaction, then Section 9-515(b) provides that it is effective for 30 years. Likewise, if the record indicates that the debtor is a transmitting utility, then Section 9-515(f) makes it effective until terminated.
Some states omitted either public-finance or manufactured-home transactions from the scope of Section 9-515(b). Georgia, however, omitted the official text of subsections (b) and (f) entirely from Ga. Code Ann. § 11-9-515. As a result, all financing statements filed in Georgia are initially effective for a five-year period, no exceptions.
If a secured party sets its continuation tickler based on the assumption that Georgia law follows the uniform effective periods, it will not be reminded to file a continuation statement at the correct time and the record will lapse.
Georgia's version of Article 9 also creates a trap for the unwary UCC filer when the collateral includes growing crops. Georgia law treats growing crops in the same manner as timber to be cut, as-extracted collateral and fixtures. In other states there are no special requirements for financing statements that cover growing crops.
Under Ga. Code Ann. § 11-9-501(a)(1)(A), however, the proper place to file a financing statement covering growing crops is the same office where a mortgage would be recorded on the affected real property, not the regular UCC index. Likewise, a financing statement that covers growing crops must satisfy the additional Section 11-9-502(b) content requirements for records that cover real-estate-related collateral. Unless a financing statement covering growing crops located in Georgia is filed in accordance with Section 11-9-501(a)(1)(A) and Section 11-9-502(b), then the secured party may find itself with an unperfected security interest.
The Amendments may bring one significant Georgia statutory deviation back into uniformity with the official text. Under current Section 11- 9-502(c), a record of a mortgage cannot be effective as a financing statement filed as a fixture filing. The bill introduced in Georgia this year to enact the Amendments replaces current Section 11-9-502(c) with the uniform text from UCC § 9-502(c). However, the legislation, as introduced, will not change the other non-uniform provisions described above.
Idaho
Perfecting a security interest in any farm products requires special care in Idaho. If a security interest includes farm products as collateral, non-uniform Idaho Code Ann. § 28-9-502(e) imposes additional requirements for the sufficiency of the financing statement.
Under the official text of UCC § 9-502(a), a financing statement is sufficient if it provides just three pieces of information: the name of the debtor, name of the secured party, and an indication of the collateral. There are no special rules for the sufficiency of a financing statement that cover farm products.
In Idaho, however, Section 28-9-502(e) applies the federal requirements for an "Effective Financing Statement," as defined in 7 U.S.C. § 1631(c)(4) of the Food Security Act, to the sufficiency of a UCC financing statement that covers farm products. Under this non- uniform provision, a written financing statement covering farm products is sufficient if it provides the names and addresses of the parties, is signed or authenticated by the debtor, and includes the debtor's Social Security Number (SSN) or other unique identifier selected by the secretary of state. Moreover, the record must describe the farm products by category and identify the locations by county where the farm products are produced or located.
To further complicate matters, the content requirements differ for records filed electronically and those submitted on written forms. For example, the debtor must sign or otherwise authenticate a written UCC record that covers farm products. The same record submitted electronically, however, would not require the debtor's signature or authentication.
Indiana
A non-uniform provision added to Ind. Code § 26-1-9.1-502 imposes a unique duty on the secured party following the filing of a financing statement. Subsection (f) requires the secured party to furnish a copy of a financing statement to the debtor within 30 days of the file date. The provision also places the burden of proving compliance with this requirement squarely on the secured party.
It is significant that the text of Section 26-1-9.1-502(f) does not limit the secured party's responsibility to providing the debtor with a copy of just an "initial financing statement." Instead, subsection (f) uses the broader term "financing statement." The official text of Article 9 and Ind. Code § 26-1-9.1-102(a)(39) both define "financing statement" to include any filed record related to the initial financing statement. Consequently, this provision arguably requires the secured party to send the debtor a copy not just of the initial financing statement, but also any related amendments filed at a later date.
A secured party's failure to send a copy of the filed record to the debtor will not make the record ineffective. Nevertheless, there are potential costs if the secured party overlooks this requirement. A secured party that fails to comply with subsection (f) is subject to the penalties set forth in Ind. Code § 26-1-9.1-625. To play it safe, a prudent UCC filer should promptly send the debtor a copy of any UCC record filed in Indiana by a method that provides proof of delivery.
Louisiana
The risk of filing office error generally falls on those who search the UCC records. A secured party is protected against a filing office indexing error by UCC § 9-517. Likewise, UCC § 9-516(d) partially protects the secured party when the filing office wrongfully refuses to accept the record, except in Louisiana.
Louisiana omitted subsection (d) when it enacted La. Rev. Stat. § 10:9-516. Consequently, a record wrongfully rejected by a Louisiana filing office through no fault of the secured party is nevertheless ineffective against other creditors.
To avoid the risk caused by the omission of UCC § 9-516(d) in Louisiana, filers should assume that a wrongfully rejected record is ineffective. The UCC filer must respond promptly to any notice of rejection from a Louisiana filing office and do what it takes to get the record filed.
South Dakota
Prior to 2001, several states required financing statements to include the SSN of an individual debtor. By early 2012, only South Dakota still required an individual's SSN by statute for all financing statements. It was widely hoped that South Dakota would use the Amendments legislation as an opportunity to finally eliminate the SSN requirement. That did not happen. When it enacted the Amendments in March 2012, South Dakota retained the SSN requirement for sufficiency in S.D. Codified Laws § 57A-9-502(a)(1).
UCC filers must continue to provide an individual debtor's SSN on any financing statement submitted in South Dakota or the filing office will reject the record. Moreover, the SSN is a requirement for sufficiency under S.D. Codified Laws § 57A-9-502(a)(1). A record without the SSN may not be effective even if the filing office accepts it. The safest course of action, therefore, is to ensure that all financing statements submitted to a South Dakota filing office provide the individual debtor's SSN.
Wyoming
In 2013, Wyoming enacted a significant non-uniform amendment to the Article 9 financing statement duration and effectiveness rules. The new law amends Wyo. Stat. Ann. § 34.1-9-515(a) to provide that financing statements filed after July 1, 2013, will be effective for 10 years. In addition, the filing of a continuation statement after July 1, 2013, will extend the effectiveness of the related financing statement for an additional 10-year period.
The reasoning behind this non-uniform departure from the official text of UCC § 9-515(a) is that a growing number of finance transactions now extend beyond five years. A 10-year effective period for financing statements reduces the risk that a lender would inadvertently miss the continuation deadline and become unperfected. It also saves lenders the cost of filing continuation statements because nearly all transactions will conclude within that 10-year period.
A 10-year effective period for UCC financing statements should reduce the number of instances where a record inadvertently lapses because the secured party missed the continuation deadline. Whether this benefit outweighs the added costs of a longer effective period remains to be seen. It will take several years before the lenders and debtors feel the full impact of the increased transaction costs.
Conclusion
The states listed above are by no means the only jurisdictions that enacted UCC Article 9 with non-uniform filing requirements. Perhaps someday, every state will finally adopt the full official text of the Article 9 filing provisions. Until then, non-uniform filing requirements will continue to create risk for secured parties and their legal counsel. The best way to limit that risk is never to assume that the filing requirements are entirely uniform. The UCC filer must carefully review the statutory requirements prior to filing in a particular state.